Massachusetts has launched a new way of funding community colleges, for the first time tying a large portion of each college’s budget to its ability to improve graduation rates, meet the state’s workforce needs, and help more minority students thrive.
The state’s move to so-called performance funding is one of the most ambitious in the nation; about half of each school’s allocation will hinge on such factors when it is fully phased in within a couple years.
Every community college president endorsed the plan, a turnaround from less than two years ago when reform proposals from Governor Deval Patrick and others met with outrage among community college leaders.
A $20 million boost in funding from the Legislature, after years of budget cuts, helped make the idea palatable, and no campus is losing money this year, so they have time to adjust to the new standards.
The change also redresses huge imbalances that left the best-funded community colleges — topped by the scandal-plagued Roxbury Community College — getting more than double the money per student than the most starved campuses received.
Several community college presidents and other educators expressed optimism that the new carrot-and-stick approach will produce better outcomes for a group of 15 institutions that educates about half of the public college students in Massachusetts, but often with anemic results. Most of the community colleges have three-year graduation rates of 18 percent or less.
“Massachusetts can go from laggard to leader here,” said Paul S. Grogan, president of the Boston Foundation. “I’m very impressed with the zeal that the college presidents are displaying to show what they can do.”
A 2011 Boston Foundation report, which proposed performance funding, warned of severe economic costs if community colleges don't do a better job. An estimated 38 percent of job openings in the state require more than a high school diploma and less than a four-year degree, and business leaders say jobs go unfilled for lack of qualified applicants.
Patrick then made a similar proposal in his State of the Commonwealth address in January 2012, and lawmakers passed a bill that called for a performance funding model to be developed.
Performance funding for education is in vogue around the country, with about 10 states having in the last few years linked some of their budgets to results, experts said, either specifically for community colleges or for all their public colleges. In most cases, only 5 to 10 percent of the budget is being tied to performance.
One major exception is Tennessee, which linked its entire higher education budget to performance three years ago and has seen improvements since.
However, an earlier wave of state performance funding initiatives failed to help students do better, said Kevin Dougherty, a professor at Columbia University’s Teachers College, in part because the amount of money that states put on the line was too small.
The idea also carries risks, he said. To boost their statistics, colleges could quietly cut back on recruiting at weaker high schools whose graduates are often ill-prepared, or encourage students not to enroll in difficult classes they are less likely to pass.
Still, Dougherty sees potential in what Massachusetts and other states are attempting, putting larger sums of money on the table than in past years, and designing benchmarks more carefully.
“There’s some interesting signs that a more effective form of performance funding may be emerging, but I think we want to be cautious,” he said. “Too often, state policy makers say, ‘This is it, we found it.’ And they run off in this direction. You need to proceed much more cautiously.”
To hash out the funding formula in Massachusetts, Richard M. Freeland, the commissioner of higher education, brought together a group of community college presidents and an outside consultant who has helped other states design their performance funding programs.
Here’s what they came up with: To start, every community college will get an operating subsidy of $4.5 million. Then, half of the remaining allocation will be distributed based on student credit hours completed, weighted for the cost of teaching in different fields. That alone sets a standard for results, Freeland said, because colleges won’t get any money for students who drop classes.
The other half of the remaining funding will be based on performance, including the numbers of students who earn degrees or certificates, or transfer with a certain number of credits.
There’s extra credit for degrees in sought-after fields including science, health care, and technology, and also for the successes of low-income students.
Adopting that formula immediately would have cut some of the colleges’ budgets by as much as 14 percent. So to give them time to adapt, the distribution of money — a total of $246 million — was adjusted so that each school would get at least a 3.5 percent increase this fiscal year, which started last month.
Freeland expects to fine-tune the formula and have it fully in place in two to three years.
In recent years, the Legislature has given each community college the same percentage increase or decrease, with no attention to which were expanding or which were better funded historically thanks to political influence.
That left growing Bristol Community College, based in Fall River, and Quinsigamond Community College, in Worcester, among the worst-funded campuses, each getting less than $3,000 per student in 2010, while Roxbury Community College received more than $6,000 per student, according to the Boston Foundation.
So this year, Bristol is getting a 21 percent boost and Quinsigamond is getting 26 percent more.
Bill Messner, president of Holyoke Community College and until recently chairman of the state’s council of community college presidents, said he and his colleagues believe it is in their best interest to have a rational funding process.
As for the risks that they will be punished for poor results, Messner said, the presidents decided, “rather than fighting with the governor and Legislature . . . this was an opportunity for us, to demonstrate that we could act as a group in a positive vein [and] that we were willing to be held accountable.”
Correction: Because of incomplete information provided to the Globe, an earlier version of this story about a new funding formula for the state’s community colleges incorrectly said the formula gives extra credit for the successes of African-American and Latino students. It does not.